Interim report May-October 2017/18

Second quarter

  •  Gross order intake amounted to SEK 3,267 M (3,383), unchanged based on constant exchange rates and a decrease of 3 percent in SEK. Growth was strong in North America, China and South-East Asia.
  •  Net sales was SEK 2,802 M (2,434), an increase of 19 percent based on constant exchange rates and 15 percent in SEK.
  • Adjusted EBITA* amounted to SEK 509 M (391). Items affecting comparability was SEK 0 M (-117). Bad debt losses amounted to SEK -18 M (-23).
  •  The effect from changes in exchange rates compared with last year was approximately SEK -25 M (95) including hedges.
  •  Adjusted EBITA* margin was 18 percent (16).
  •  Operating result was SEK 365 M (140).
  •  Net income amounted to SEK 247 M (55). Earnings per share was SEK 0.65 (0.14) before/after dilution.
  •  Cash flow after continuous investments improved to SEK 226 M (114).
  •  Two new Elekta Unity customers.
  •  The final stage of the Unity development was extended and accordingly the planned CE mark and FDA submission. Consequently, the target for the first 75 orders was adjusted to the first half of calendar year 2020. 

May – October 2017/18

  • Gross order intake amounted to SEK 6,005 M (6,044), unchanged based on constant exchange rates and a decrease of 1 percent in SEK.
  • Net sales was SEK 4,971 M (4,316), an increase of 16 percent based on constant exchange rates and 15 percent in SEK. 
  • Adjusted EBITA* amounted to SEK 696 M (558). Items affecting comparability was SEK 0 M (-206). Bad debt losses amounted to SEK -28 M (-29). 
  • The effect from changes in exchange rates compared with last year was approximately SEK -20 M (210) including hedges.
  • Adjusted EBITA* margin was 14 percent (13).
  • Operating result was SEK 403 M (106).
  • Net income amounted to SEK 247 M (-9). Earnings per share was SEK 0.65 (-0.03) before/after dilution.
  • Cash flow after continuous investments improved to SEK 131 M (-194).

*Adjusted for items affecting comparability and bad debt losses, for a reconciliation to operating result, see page 12.The split between restructuring costs and costs for legal processes is presented on page 20.
**Compared to last fiscal year based on constant exchange rates.

Forward-looking information. This report includes forward-looking statements including, but not limited to, statements relating to operational and financial performance, market conditions, and other similar matters. These forward-looking statements are based on current expectations about future events. Although the expectations described in these statements are assumed to be reasonable, there is no guarantee that such forward-looking statements will materialize or are accurate. Since these statements involve assumptions and estimates that are subject to risks and uncertainties, results could differ materially from those set out in the statement. Some of these risks and uncertainties are described further in the section “Risks and uncertainties”. Elekta undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law or stock exchange regulations.

President and CEO comments

Our operations are improving and we are strengthening our platform for future growth. We have a strong and competitive product portfolio with good development in for example our linear accelerator and Leksell Gamma Knife® business.

I am satisfied with our financial performance in the quarter and it is developing according to plan. Net sales was up 19 percent in the quarter and 16 percent for the first half based on constant exchange rate. This was driven by strong net sales performance in China, Western Europe and emerging markets. Gross margin increased and adjusted EBITA amounted to SEK 509 M, equal to a 30 percent improvement. That said, it’s clear to me that we have further potential for operational improvements and we will relentlessly work to realize it.

Our order intake in the quarter was strong in North America, China and South-East Asia. Activities for the turnaround in the U.S. are generating results, which was reflected in some impressive new customer wins, among them a major win with 21stCentury Oncology. Activity in Europe and Japan was slow and total order intake was unchanged.

We are constantly improving our processes and increasing our efficiency. Direct cost savings are on track and we have reduced operating costs. The earlier increase in R&D investments has stabilized. In addition, results are clearly visible in higher cash flow and positive balance sheet effects. Cash flow improved over SEK 300 M in the first half and the rolling 12-month cash conversion rate is at 131 percent. Working capital in relation to sales amounted to -6 percent, which is notably better than our target of less than 5 percent.

Recently, we have made two difficult decisions for the short term, but I’m convinced that they are correct and necessary for the long term. Firstly, we have extended the final stage of the development and testing of Elekta Unity in order to finalize and validate the linac control system, as well as ensure that customers can make use of the full potential of high-field functional MRI imaging from day one. Unity is a unique and future-proof system as it’s the only technology that combines an advanced linac with the real time visualization from a high-field MRI.

Apart from postponing CE mark to the first half of 2018, the program is progressing well. Interest from clinicians was very strong when we made the U.S. introduction of Unity at ASTRO in San Diego. In Europe, University Medical Center Utrecht recently presented results from the first patient study that demonstrated precision beyond expectations. The system generates excellent imaging quality synchronized with precise beam delivery. We now have 18 customers after we recently added two, one from a leading hospital in Italy and another from a research collaborator in the USA.

We are convinced that the new technology will revolutionize radiation therapy and create completely new opportunities for physicians and their patients. With the shift in CE mark and FDA submission, we adjust our target for the first 75 orders accordingly to the first half of calendar year 2020.

Secondly, we found it necessary to adjust the 4-year-old McLaren Health Care contract in the order backlog. The project had developed very slowly and the decision to continue our relation on a smaller basis was made in mutual agreement with McLaren.

We are on the right track to create a stronger Elekta and building a foundation for future profitable growth. During my first six quarters our work have been characterized by positive change, increased transparency, openness and customer focus. We have also identified further activities with focus on operational excellence, which means that a lot of hard work and improvement potential remains.

Our targets for the year are clear – we will deliver profitable growth and reach an EBITA margin exceeding 20 percent through growth and our work with continuous operational improvements.

Richard Hausmann
President and CEO  

Shareholder information

Conference call

Elekta will host a telephone conference at 10:00-11:00 CET on November 30, 2017, with president and CEO Richard Hausmann, and CFO Gustaf Salford.

To take part in the conference call, please dial in about five minutes in advance.

Swedish dial-in number: +46 (0) 8 566 426 91
UK dial-in number: +44 (0) 203 008 9808
US dial-in number: +1 855 753 2237

The webcast will be through the following link:

http://event.on24.com/wcc/r/1551126-1/E4BC2ACE4B126C20D0B7272EE6FA15A5

This is information that Elekta AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication at 07:30 CET on November 30, 2017.

Gustaf Salford
CFO
Elekta AB (publ)
+46 8 587 25 487
gustaf.salford@elekta.com  

Johan Andersson
Director Investor Relations
Elekta AB (publ)
+46 8 587 25 415
johan.andersson@elekta.com  

Tobias Bülow
Director Financial Communications
Elekta AB (publ)
+46 8 587 25 734
tobias.bulow@elekta.com

Financial calendar

Interim report             March 2, 2018  May-January 2017/18                          Year-end-report                              June 1, 2018  May-April 2017/18


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The full report (PDF)

About Elekta

Elekta is proud to be the leading innovator of equipment and software used to improve, prolong and save the lives of people with cancer and brain disorders. Our advanced, effective solutions are created in collaboration with customers, and more than 6,000 hospitals worldwide rely on Elekta technology. Our treatment solutions and oncology informatics portfolios are designed to enhance the delivery of radiation therapy, radiosurgery and brachytherapy, and to drive cost efficiency in clinical workflows. Elekta employs 3,600 people around the world. Headquartered in Stockholm, Sweden, Elekta is listed on NASDAQ Stockholm. www.elekta.com.